Punjab

StateCommission

CC/701/2018

Rajinder Singh and other - Complainant(s)

Versus

Magma Fincorp limited and other - Opp.Party(s)

Munish Goel

20 May 2019

ORDER

                                                     FIRST ADDITIONAL BENCH

 

STATE  CONSUMER  DISPUTES  REDRESSAL  COMMISSION, PUNJAB, SECTOR 37-A, DAKSHIN MARG, CHANDIGARH.

 

              Consumer Complaint No.701 of 2018

                                                           Date of Institution:  30.08.2018

                                                           Order reserved on: 14.05.2019

                                                            Date of Decision :   20.05.2019

         

1.       Rajinder Singh S/o Banarsi Dass R/o House No.112, Milk Colony, Village Dhanas, Chandigarh.

2.       Rajinder Singh & Brothers, Village Raipur Khurd, UT, Chandigarh, through its proprietor Rajinder Singh.

3.       Jagwinder Kaur W/o Rajinder Singh R/o House No.112, Milk Colony, Village Dhanas, Chandigarh (Rajinderbros @gmail.com).

                                                                                   .….Complainants

                                          Versus

1.       Magma Fincorp Limited, Regd. Office Magma House, 24 Park Street Kolkata, 700016.

2.       Magma Fincorp Limited SCF 75, 2nd and 3rd floor, Sahibzada Ajit Singh Nagar, Punjab-160062.

3.       Nabankur Gupta, Director of Magma Fincorp Limited, Regd. Office Magma House, 24 Park Street Kolkata, 700016.

4.       Satya Ganguly Brata, Director of Magma Fincorp Limited, Regd. Office Magma House, 24 Park Street Kolkata 700016. (customercare@magmahfc.co.in) of all OPs.

                                                                    .....Opposite Parties

Complaint U/s 17(1)(a) of the Consumer Protection Act, 1986 (as amended up to date).

Quorum:-

          Shri J. S. Klar, Presiding Judicial Member

              Shri Rajinder Kumar Goyal, Member

Present:-

          For the complainants      :  Sh. Munish Goel, Advocate

          For the opposite parties            :  Sh. Tushar Arora, Advocate

          ……………………………………………………………………….

J. S. KLAR, PRESIDING JUDICIAL MEMBER:-

                    The complainants have instituted this complaint U/s 17(1)(a) of the Consumer Protection Act 1986 (in short the "Act") against opposite parties (in short the 'OPs') on the averments that complainant no.1 Rajinder Singh was provided proposal number for loan account no.HL/0038/H/000180 for availing a loan of Rs.11,00,000/- for tenure of 180 months, vide letter dated 28.05.2015 Ex.C-1. He was provided another proposal number for loan account no.HL/0038/H/13/000181 for availing a loan of Rs.39,00,000/- for tenure of 180 months, vide letter dated 28.05.2015 Ex.C-2. He was asked by OPs to submit two more names as co-borrowers and complainant no.1 submitted the name of his proprietorship firm Rajinder Singh & Brothers and Jagwinder Kaur, i.e. complainant nos.2 and 3. Complainant no.2 i.e. Rajinder Singh & Brothers is only the sole proprietorship concern being run by complainant no.1 for earning his livelihood by means of self employment. The complainants submitted all the documents alongwith the original sale deed dated 07.04.2015 and sale deed dated 21.01.2013 and sale deed dated 17.09.2012 and another sale deed dated 29.12.2009. They further submitted the jamabandis for the year 1980-81, 1985-86, 1990-91, 1995-96, 2000-2001, 2005-2006 and 2010-2011 alongwith NEC dated 06.04.2015 and agreement to sell dated 07.04.2015 and OPs duly acknowledged the same vide Ex.C-4. They paid the EMIs regularly to OPs.  Complainant no.1 submitted the application for the foreclosure of the loan accounts in September 2015 and OPs issued him letter dated 26.09.2015 for charging foreclosure charges of Rs.1,54,744.01/- in loan account no.HL/0038/H /13/000181. OPs issued another letter dated 26.09.2015 charging foreclosure charges of Rs.43,645.67/- in loan account no.HL/0038/H/13/000180 illegally, vide Ex.C-5 and C-6. The complainants pleaded with OPs not to enforce foreclosure charges as per RBI guideline, vide its circular no.DNBS(PD).CC No.399.03.10.42 /2014-15 dated 14.07.2014, Ex.C-7, but to no effect. The complainants were left with no other option but to repay the loan amounts with foreclosure charges, vide statements
Ex.C-8 and C-9. Their loan accounts were closed by OPs vide letter dated 01.07.2016 Ex.C-10 and also issued no objection certificate dated 01.07.2016 Ex.C-11. They wrote an email dated 03.09.2016 to OPs for waiving off the foreclosure charges in view of RBI guidelines of 2014, but OPs refused to do the same, vide email dated Ex.C-13. They alleged deficiency in service and unfair trade practice on the part of OPs and prayed for below noted reliefs against OPs:

1. OPs be directed to refund the amount of Rs.1,98,389/- with interest @18% per annum from the date of its illegal charging till payment.
2. to pay Rs.Two Lakh as compensation for mental harassment.
3. to pay Rs.33,000/- as costs of litigation.

2.                 Upon notice, OPs appeared and filed written reply raising preliminary objections that loan facility has been used by complainants for commercial purposes and they are not consumers. The complaint is barred by time, as loan was foreclosed on 14.06.2016 and the complaint has been filed on 28.08.2018 by complainants. The OPs stated to complainants in clear terms on 26.09.2015 to charge the foreclosure charges. This compliant is not consumer complaint, as it is barred by principle of misjoinder of the parties. Complainant no.2 co-borrower is a firm engaged in commercial activities and is not an individual. The Reserve Bank of India's Regulation is not applicable in this case. The amount of foreclosure charges is payable, as per loan agreements executed between the parties. The account cannot be settled under C.P. Act between the parties. The OPs controverted the other averments of the complainant and prayed for dismissal of the complaint.

3.                 We have heard the learned counsel for the parties and have also examined the record of the case. Ex.C-1 is the copy of proposal number (loan account no.):HL/0038/H/13/000180 for sanctioned loan amount of Rs.11,00,000/- with floating rate of interest @14.5% for 180 months tenure. Ex.C-2 is the copy of another proposal number (loan account no.):HL/0038/H/13/ 000181 for sanctioned loan amount of Rs.39,00,000/- with floating rate of interest @14.5% for 180 months tenure. Ex.C-3 is the copy of certificate of provisional registration of Rajinder Singh & Brothers dated 27.06.2017. Ex.C-4 is the copy of acknowledgment regarding receipt of documents of property issued by OPs to complainant no.1. Ex.C-5 and C-6 are the copies of termination report dated 26.09.2015 of above two loan accounts issued by OPs to complainant no.1, showing the foreclosure charges of Rs.1,54,744.01/- and Rs.43,645.67/- respectively. Ex.C-7 is the copy of Reserve Bank of India (RBI)'s circular dated 14.07.2014 issued to all Non Banking Financial Companies/ Residuary Non Banking Companies, advising them not to charge foreclosure charges on all floating rate term loans sanctioned to individual borrowers with immediate effect. Ex.C-8 and C-9 are the copies of account statements of complainant. Ex.C-10 is copy of letter from OPs to complainant no.1 regarding closure of loan account no.HL/0038/H/13/000180 & HL/0038/H /13/000181. Ex.C-12 is the copy of email dated 26.07.2018 by complainant no.1 to OPs regarding refund of foreclosure charges and Ex.C-13 is the copy of reply thereof refusing to refund the foreclosure charges by OPs. Ex.C-14 is the copy of Company Master Data of OP company.

4.                 To counter this evidence of complainant, OPs tendered in evidence the copy application for advancing the loan of Rs.39,00,000/- by complainant to OPs Ex.R-1 with terms and conditions. Ex.R-2 is the copy of loan agreement executed between the parties. This is the vital document on the record as contended by counsel for OPs before us.

5.                 From careful appraisal of above referred evidence on the record and the loan agreement Ex.R-2, the expression borrower includes the partners of the firm and their respective legal heirs, executors and administrators and in the event of borrower being sole proprietorship, the sole proprietor and his/her heirs administrators and executors and etc. Clause 5 of this agreement deals with pre-payment and foreclosure charges. The contention of OPs is that complainants are not the consumers, as such the complaint is not maintainable in the present form. Complainant no.1 is individual living person and complainant no.2 is his sole proprietorship concern meaning thereby the fictional trade name of complainant no.1 has been operated in this case and complainant no.3 is his wife only. Complainant no.1 pleaded and also testified in his affidavit on the record that he obtained loan for the purpose of earning his livelihood by means of self employment only. To counter this plea and evidence, the  OPs have not brought any substance on the record to the effect that complainant no.1 is not the consumer. He is held to be consumer of OPs in this case and complaint is held to be maintainable. The counsel for complainants contended before us that complainant no.1 Rajinder Singh obtained loan, being sole proprietor of complainant no.2 Rajinder Singh and Brothers concern. He joined complainant no.2 his sole proprietorship concern Rajinder Singh and Brother and his wife Jagminder Kaur complainant no.3 as co-borrowers at the insistence of OPs in this case only. It was contended by counsel for complainants that complainant no.2 Rajinder Singh & Brothers is sole proprietorship concern being run by complainant no.1 Rajinder Singh in his fictional trade name to earn his livelihood by means of self-employment. Complainant no.3 who was joined as co-borrower is his wife only. On the other hand, the submission of counsel for OPs is that as per information received vide DNBR.PD.Co.No.1652/03.07.031/2018-19 dated 11.02.2019 by Sh. Sandeep Suri counsel for OPs from Central Public Information Officer of Reserve Bank of India that Reserve Bank of India has directed NBFCs registered with it not to charge foreclosure charges/ pre-payment penalties on all floating rate term loans sanctioned to individual borrowers. The benefit of waiver of foreclosure charges/ prepayment penalty is available only in respect of floating rate term loan availed by natural persons in their individual capacity, and not to proprietors or partners of a firm. Where the loan is availed jointly with a co-obligant(s) all persons who are party to the loan, whether as borrower(s) or co-obligant(s), shall be natural persons within their individual capacity and not as a proprietor/partner of a firm. The forceful submission of counsel for OPs is that complainant no.2 is a proprietorship concern joined as co-borrower and is not a natural person, as per the information given by the Reserve Bank of India dated 11.02.2019 to counsel for OPs under Right to Information Act, 2005.

6.                 The only point which arises for adjudication before us is whether the co-borrower Rajinder Singh & Brothers complainant no.2, being a sole proprietorship concern of complainant no.1 Rajinder Singh is a natural person or not. The forceful submission of counsel for OPs is that Rajinder Singh & Brothers complainant no.2 is a proprietorship concern and is not a natural persona and as such complainant no.1 is not entitled to waiver of foreclosure charges.

7.                 Complainant no.1 obtained the loans from OPs and he joined his sole proprietorship concern, arrayed as complainant no.2 and his wife complainant no.3 with him at the asking of OPs for obtaining above loan amounts. The contention of counsel for OPs is that complainants are not natural persons and as such the benefit of above circular of RBI against foreclosure charges cannot be extended to them. We find that complainant no.2 is the sole proprietorship concern of complainant no.1 only and complainant no.3 is his wife. Now what is the status of sole proprietorship has to be examined by us in this case. The Apex Court has held in "M/s Bhagwati Vanaspati Traders Vs. Senior Superintendent of Post Office, Meerut" in Civil Appeal No.4854 of 2009 decided on 10.10.2014 that sole proprietorship concern allows fictional use of a trade name on behalf of an individual. Only one individual is the owner of a sole proprietorship concern. It makes no difference whether the individuals name, or the proprietorship's name is recorded. It was further observed that if Superintendent Post Office Meerut was not agreeable, it should have corrected the individual name in the purchase of NSC. As per the observation of the Apex Court, the sole proprietorship concern is an individual name using fictional trade name in place of his own name. The rigidity adopted by the authorities is not understandable. In this view of the matter, as settled by the Apex Court, sole proprietorship name is the name of individual only. Consequently, complainant no.1 obtained the loan and complainant no.2 is his proprietorship concern only meaning thereby it is complainant no.1 Rajinder Singh, who obtained the loan. Complainant no.3 is none else, but wife of complainant no.1 and it is complainant no.1 who obtained the loan and joined other co-obligants for the sake of compliance of formalities, as asked by OPs. Consequently, complainant no.1 Rajinder Singh is held to be a natural person and he is entitled to the benefit of waiver of foreclosure charges, as per the above circular of Reserve Bank of India (RBI) and as per the information provided by RBI to counsel for OPs under Right to Information Act 2005 placed on the record. In this view of direction of Reserve Bank of India, the OPs cannot derive any benefit from provision of clause 5 of the loan agreement for imposition of foreclosure charges in this case, being contrary to above circular of RBI.

8.                 As a result of our above discussion, the complaint is accepted and below noted directions are issued to OPs:

(a) OPs are directed to refund the foreclosure charges of Rs.1,54,744/- and Rs.43,645/- to complainant no.1 with rate of interest as charged by OPs from complainant no.1 from the date of their deposit till realization.

(b) OPs are further directed to pay Rs.20,000/- as compensation for mental harassment and Rs.10,000/- as costs of litigation to complainant no.1.

The above amounts shall be payable by OPs to complainant no.1 within 45 days from the date of receipt of certified copy of this order.

9.                 Arguments in this complaint were heard on 14.05.2019 and the order was reserved. The certified copies of the order be communicated to the parties as per rules.

10.               The complaint could not be decided within the statutory period due to heavy pendency of court cases.

 

                                                                (J. S. KLAR)

                                               PRESIDING JUDICIAL MEMBER

                                                      (RAJINDER KUMAR GOYAL)

                                                                      MEMBER

May 20, 2019.                                                                 

(MM)